The federal government issued an economic statement on November 21, 2018 which included the announcement of the “Accelerated Investment Incentive.” The Accelerated Investment Incentive effectively increases the amount of capital cost allowance that can be claimed on the purchase of a capital property in the year of acquisition. The new rules will apply to purchases after November 20, 2018 with the following exclusions:
- Property previously owned by the taxpayer or a non-arm’s length person
- Property transferred on a rollover basis
- M&P and specified clean energy property (separate enhanced rules not discussed here)
The Incentive will allow for a maximum CCA claim in the year of acquisition of 1.5 times the standard CCA class rate in the year of acquisition (previously the claim in year of acquisition was ½ of the standard CCA rate). In subsequent years the deduction will be limited to the CCA class rate on a declining balance basis.
To illustrate consider that Class 8 property is entitled to a 20% deduction. In the year of acquisition the allowable deduction is 10%. Under the Accelerated Investment Incentive eligible additions to Class 8 will be entitled to a 30% deduction in year of acquisition (20% x 1.5).
If you would like to discuss this further please contact one of our advisors today!